Apple Loses Top-Stock Crown as Analysts Downgrade on iPhone Risk
Tuesday, Jan 21, 2025 4:49 pm ET
5min read Apple Inc. (NASDAQ:AAPL) has been a darling of the stock market for years, but recent downgrades by analysts have raised concerns about the tech giant's future prospects. The company's stock, which had been the most valuable in the world, has now been surpassed by Saudi Aramco, according to data from Bloomberg. This shift in market sentiment comes as analysts express concerns about Apple's iPhone sales and the potential slowdown in AI uptake.
Jefferies analyst Edison Lee downgraded Apple's stock to 'underperform' from 'hold' on Monday, citing weak iPhone sales and a subdued outlook for iPhone 17 and 18 due to "slower AI uptake and commercialization." The firm also reduced its earnings per share (EPS) forecasts for Apple by 2% to 23% over the next three years, with fiscal year 2025 (FY25) and FY26 EPS estimates now approximately 4% below consensus.
The downgrade comes as Apple faces mounting pressure from competitors and a challenging macroeconomic environment. The company's iPhone sales have been declining, and its market share has been eroding. In the first quarter of 2024, Apple's iPhone shipments were down 2 percent to 58 million, while Samsung's shipments dropped by 19 percent year-over-year. This decline in iPhone sales could allow competitors like Samsung, Xiaomi, and others to gain market share.
The potential slowdown in AI uptake could also dampen expectations for a significant upgrade cycle driven by AI in the iPhone. According to a third-party survey, US consumers do not find smartphone AI particularly useful, which could further slow down the adoption of AI features in iPhones. This slowdown in AI uptake could make it more difficult for Apple to differentiate its products from competitors and maintain its premium pricing strategy.
Apple's stock has already declined over 8% in 2025, following last year’s 30% gain. The rare bearish call stands in contrast to broader Wall Street sentiment, with only three other analysts recommending selling Apple shares compared to 19 buy ratings, according to Tipranks.com. However, the downgrade by Jefferies highlights the growing concerns about Apple's iPhone sales and the potential slowdown in AI uptake.
In conclusion, Apple's recent stock downgrades and the potential slowdown in iPhone sales and AI uptake raise concerns about the company's future prospects. As Apple faces increasing competition and a challenging macroeconomic environment, investors should closely monitor the company's performance and consider the risks associated with its iPhone sales and AI adoption.
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